U.S. Home Sales to Bottom Out in 2008

Washington, D.C.–Mortgage restrictions will cause U.S. home sales to hit rock bottom in 2008, according to the Washington, D.C.-based Mortgage Bankers Association.In a report released Monday, the Washington-based group predicted previously owned home sales would drop to an 11-year low of 4.94 million and then rise to 5.12 million in 2009, Bloomberg reports. New home sales likely will tumble 15 percent to 666,000 from 2007 and then increase 6.6 percent in 2009.As the U.S. housing slump enters its third year, the credit crisis has worn down mortgage lenders’ reserves, hampering their ability to make new loans, according to MBA chief economist Doug Duncan.Mortgage originations for home loans will drop 18 percent to $955 billion in 2008–almost half what was lent in 2005, the MBA forecast said. The group forecast that purchase originations will rise 5 percent in 2009 to $1 trillion and that loan refinancing will drop about 14 percent in 2008.Rates are also expected to fall, according to the MBA. The average 30-year fixed mortgage rate will drop to 6.2 percent, the MBA estimates, and an annually adjustable-rate mortgage will be 5.5 percent.